Inc. Magazine Has a List of 50 PE Firms ‘You Can Trust.’ But Can You Really?

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PRIVATE EQUITY

Inc magazine has published a list of 50 private equity firms “you can trust,” according to the magazine:  “Private equity firms are now sitting on a record amount of uninvested capital, which is good news for businesses seeking funds. That cash pile is prompting those firms to expand their purview and do deals with businesses that just five years ago would have been unlikely targets, according to Tom Stewart, executive director of the National Center for the Middle Market. 

“‘They’re investing in younger, earlier-stage companies, and they’re more willing to take a minority stake than they were, because they’ve got to put the money to work,’ Stewart says. ‘It’s more of a sellers’ market.’ Family businesses are often strong can­didates for outside investment. ‘It’s a rare family that can continue to evolve and grow a business without help from a third party,’ says Dave Brackett, co-founder and CEO of private credit manager Antares Capital, which has helped finance acqui­sitions for more than 400 private equity firms. ‘You constantly need to innovate and bring people on board.’”

Color us skeptical: It’s certainly true that PE firms are sitting on piles of cash but should business owners trust them to have the best interests of their business at heart? What’s been your experience with private equity? Tell us what you think by emailing us at mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

THE ECONOMY

A strong jobs report is easing economic fears: “The job market has lost some momentum since last year, when tax cuts and increased government spending gave the economy a jolt. Employers have added an average of 171,000 jobs over the past three months, down from 223,000 per month last year. Wage growth, which picked up late last year, appears to have stalled again—average hourly earnings were up 3.1 percent in June from a year earlier, a pace that has barely budged in months.

“The unemployment rate rose slightly, although at 3.7 percent it remains near a multi-decade low. Overall, Friday’s figures indicated that the economy is gradually cooling, not headed for a deep freeze. Separate data from the Institute for Supply Management this week showed that both the manufacturing and services sectors grew in June by a variety of measures, though more slowly than in May. The housing market has shown signs of weakness, but that hasn’t yet discouraged consumers from spending money, perhaps because layoffs are near record lows.”

MANAGEMENT

Here’s how the founder of Shake Shack, Danny Meyer, learned to stop micromanaging: “‘When I joined, Danny had to be part of every decision,’ [Susan] Salgado said. ‘The menu price was changing by 50 cents on brisket at Blue Smoke’—a barbecue restaurant that Union Square Hospitality opened in 2002—‘and the general manager had to ask Danny first. At a point that is disabling, because he doesn’t have the bandwidth.’ They sat down and made a list of business decisions, divided into three categories: those Meyer would always be involved with, those he would be informed of but not asked to weigh in on, and those that would be completely delegated.

“Meyer had to learn to discipline himself not to micromanage, especially on aesthetic details. Whenever he went into one of the restaurants, his immediate temptation was to point out small problems to staff so they might get fixed—a framed picture slightly askew, a light fixture set too bright. But this was an operational mess. … He learned to point out these problems only to the manager, who could perform triage and direct resources to fixing only the most important problems.”

E-COMMERCE

Lifestyle publisher PopSugar created an Instagram tool for increasing referral traffic on the Stories feature last fall and will debut a similar tool for retailers’ e-commerce ventures: “Thanks to API connections with digital retailers including Amazon and Walmart, a marketer can use Sparkle to easily build pages filled with curated collections of items for sale. Brands or retailers simply have to upload a background image, add links and marketing language to a page builder, and Sparkle will build a page that can be used in any mobile environment. … Though PopSugar began by offering the product to large retailers it already works with, it expects to begin offering a lighter version to smaller retailers through Shopify’s app ecosystem. It is toying with the idea of including a small amount of media to entice smaller retailers to use Sparkle.”

HUMAN RESOURCES

To combat employee burnout because of the “Sunday Scaries,” some companies are banning weekend and late night business emails: “In an April survey by Chicago-area mental-health center Yellowbrick, 62 percent of 2,059 working adults between the ages 23 and 38 said they felt pressure to be available around the clock through email, Slack and other work-communication channels. A recent study by researchers at Virginia Tech, Lehigh University and Colorado State University found that even the expectation of checking work emails on weekends and after-hours triggered anxiety and other harmful health effects among workers. …

“Some employers are addressing off-hours work creep. At telecom company Bandwidth Inc. in North Carolina, a vacation-blackout policy bars employees from attending to business during time off—forcing its 700 employees, including its chief executive, to pause projects or equip colleagues with the resources to cover for them, if necessary. Health-care consulting firm Vynamic created an email tool to divert messages sent after 10 p.m. into an electronic queue, to be delivered the next day at 6 a.m. The system, called zzzMail, goes dark Friday evenings until Monday morning.” 

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BUSINESS FOR SALE

A working ranch, just 40 miles from Oakland and bigger than San Francisco, is on the market for $72 million: “At 50,500 acres, the property accommodates up to 1,500 cow and calf pairs. The right buyer is someone who ‘wants to relive the Old West,’ said listing agent Todd Renfrew of California Outdoor Properties. The N3 Cattle Company ranch has been in the same family for about 85 years and spans four counties …

“It has a diverse terrain that includes watersheds, creeks, steep canyons, woodlands, meadows, ponds and rock outcroppings, and it is sprinkled with hunting cabins, Mr. Renfrew said. At its high point, the ranch has an elevation of about 4,000 feet. The main house is a low-slung four-bedroom home, and there are four cabins used for employee housing. The property also includes 200 miles of private roads for hiking, trail-running, mountain biking and all-terrain vehicles.”

REGULATION

In Mississippi, you can go to jail  for calling a veggie burger a veggie burger: “This week, a new law went into effect in Mississippi. The state now bans plant-based meat providers from using labels like ‘veggie burger’ or ‘vegan hot dog’ on their products. Such labels are potentially punishable with jail time. Words like ‘burger’ and ‘hot dog’ would be permitted only for products from slaughtered livestock.

“Proponents claim the law is necessary to avoid confusing consumers—but given that the phrase ‘veggie burger’ hasn’t been especially confusing for consumers this whole time, it certainly seems more like an effort to keep alternatives to meat away from shoppers. ‘The plant-based meat alternative category is on fire right now, with consumers demanding healthier and more sustainable options,’ Michele Simon, the executive director of the Plant-Based Foods Association, said in a statement. ‘This law, along with similar laws in several other states, is the meat lobby’s response.’”

COMPUTER SECURITY

Red Mosquito, a cybersecurity firm specializing in ransomware, is the latest in a string of companies found to simply pay off hackers: “[Fabian] Wosar, the head of research at anti-virus provider Emsisoft, said he posed as both hacker and victim so he could review the company’s communications to both sides. Red Mosquito Data Recovery ‘made no effort to not pay the ransom’ and instead went ‘straight to the ransomware author literally within minutes,’ Wosar said. ‘Behavior like this is what keeps ransomware running.’

“Since 2016, more than 4,000 ransomware attacks have taken place daily, or about 1.5 million per year, according to statistics posted by the US Department of Homeland Security … Often, victims are willing to pay more than the ransom amount to regain access to their files if they believe the money is going to a data recovery firm rather than a hacker, Wosar said … ‘Ransomware victims need to be aware that there’s no silver bullet when it comes to restoring their data,’ Wosar said. ‘There is also no shame for a data recovery company in paying the ransom, as long as they are open and transparent about it.’”

CANNABUSINESS

As more states legalize it, cannabis tourism is on the rise: “The Original Colorado Cannabis Tour includes visits to two dispensaries, after which onboard consumption of purchases is encouraged. Visits to a growing facility and a glass-pipe blowing demonstration round out the $89 bus tour, which lasts precisely four hours and 20 minutes.

“Colorado Cannabis Tours is also behind the Puff, Pass & Paint class. Mike Eymer, the company’s chief executive, teamed up with the artist Heidi Keyes to create the first class in 2015. For $49, the tour includes teacher guidance and art supplies, including a canvas to take home. Cannabis is BYOC. The concept has since spread to other states. ‘There are really some amazing paintings that come out of it,’ Ms. Keyes said. ‘With smoking you’re able to concentrate better. The colors are more vibrant and people are more willing to think outside the box.’”

OBITUARY

After 67 years, Mad magazine will stop publishing new material: “After the next two issues, a publication that specialized in thumbing its nose at authority will no longer include new material, except in year-end specials. … A giddy creation of the staid 1950s, Mad hit a circulation peak of 2.8 million in 1973. Since then, it has steadily lost readers and relevance, a victim of its own success, as its skeptical, smart-alecky sensibility became dominant in American popular culture. ‘Saturday Night Live,’ ‘The Simpsons,’ ‘South Park’ and The Onion can be counted among its heirs, and the magazine influenced a generation of comedians and comic artists, from the late-night host Stephen Colbert to the comics writer Art Spiegelman.

“‘Mad was, The entire adult world is lying to you, and we are part of the adult world. Good luck to you,’ Mr. Spiegelman said in an interview on Friday. ‘I think that shaped my entire generation.’”

And that’s what’s ahead.

Please send comments and suggestions to mattg@oxfordcenter.com and lfeldman@oxfordcenter.com.

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